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Chapter 17

Chapter 17. Managing Business Finance. Ch 17 Objectives. Identify six reasons for creating a financial plan (effectiveness). Explain what a budget is and how it is used. Explain the purpose of accounting and define the accounting equation.

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Chapter 17

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  1. Chapter 17 Managing Business Finance

  2. Ch 17 Objectives • Identify six reasons for creating a financial plan (effectiveness). • Explain what a budget is and how it is used. • Explain the purpose of accounting and define the accounting equation. • Describe the three main financial statements used by businesses.

  3. The Purpose • Determining the profitability of a business • Financial Plan

  4. An effective financial plan: • Identifies assets • Determine needed capital • Describes the expenses • Describes financial record management • Forecasts finances • Describing growth and expansion

  5. Critical Thinking • How is a financial plan like a road map?

  6. Identify Assets • Cash, equipment, buildings, supplies, inventory, and land • Conduct research before purchasing

  7. Determine Needed Capital • Money supplied by investors, banks, or business owners • Start-up capital • Difficult to obtain for a new business from investors

  8. Describe Expenses • Start-up Expenses • Cost of business assets, remodeling, security, advertising • Operating Expenses • Payroll, rent, utility bills, delivery charges, and bank fees.

  9. Describe Financial Record Management • Explains how a business will manage its records • Monitors cash flow • Legal agreements • Who will manage the money and how will it be managed?

  10. Forecast Finances • An estimate of a business’s financial outlook for each of the next few years. • Consider business conditions in the future and economic conditions • Keep estimates for income low and expenses high.

  11. Describe Growth and Expansion • Growth is needed to remain competitive • Always make a plan! • Operational and financial

  12. Budget • A plan stating how money will be used or spent. • Prediction • Three main types of budgets • Start-up • Cash (short term) • Operating (long term)

  13. EXTENSION ACTIVITY • Working in assigned teams of 4 complete the following task: • Your team is planning on opening a pretzel shop at school. Using the effective components of a financial plan, create your ‘road map’. • Also, determine an appropriate name for your pretzel shop, hours of operation, and how many employees are needed.

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